Why China isn’t celebrating

After much anticipation, the “phase one” US-China trade deal was announced on Friday, but an immediate stock market bump didn’t accompany it. Markets were at first lukewarm on the deal, though US stocks have closed at record highs this week. For now, the partial agreement avoided $160 billion worth of tariffs that were set to take effect Sunday and significantly reduces others in exchange for Beijing’s commitment to buy more US agricultural products.

The phase one deal is more of a big purchase agreement than a real trade deal, FP’s Keith Johnson explains. “In other words, the likeliest outcome after two years of expensive tariffs, bankrupt farmers, and nervous markets is that the United States might just be able to get back to where it was in the last year of the Obama administration,” he writes.

The US and Chinese statements on the preliminary deal were noticeably different. The United States made claims about Chinese concessions that aren’t mentioned in the Chinese version, and the details of the deal’s implementation still remain sketchy.

In particular, the claims that China agreed to halt forced technology transfer and protect intellectual property rights seem dubious, given that Beijing has used the same language since it acceded to the World Trade Organisation in 2001. Tariffs remain far higher than before the US-China trade war started. The response has not been celebratory on Chinese social media, where the overall feeling is that China gave away too much for too little. State media also seems cautious about celebrating the agreement. That could point to a reshaping of the deal in the new year — especially because there are signs that China is preparing for a long financial struggle with Washington, as Politico                                                                      reports.

Among the $200 billion in US purchases that Beijing has agreed is at least $40 billion of agricultural products, a target that will likely be difficult to reach despite talk of large-scale ethanol purchases.

China has already substituted many US farm goods, especially soybeans. Pork will be a major component of any deal: Prices in China are still double what they were last year, before African swine fever devastated pig herds.

There will be some paper-shuffling to make the numbers work, such as around $10 billion of trade that will be routed through the mainland instead of Hong Kong. — foreignpolicy.com.